Public Accounting Firm Merger's Impact On Audit Quality

Chinese Certified Public Accountant industry has made a considerable development since the reconstruction in1980, but due to a late start and other reasons, Chinese CPA professional level is still below the international level. Therefore, Chinese institute of CPA formally promulgated the file-"Several Opinions on Accelerating the Development of the CPA profession", and start the new strategy which named "bigger and stronger" in2007. The strategy can be understood that "Industry association would strive to focus on supporting10firms within five years. And the firms need possess the core competitiveness, able to cross-border business, and can provide the integrated services." After promulgation of the file, many firms merger for the purpose of "bigger and stronger" immediately. Through the merger wave, local accounting firms in China had a huge increase in the size and achieved the target of "bigger". But whether the "bigger" firm is the "stronger" firm? It’s necessary for us to test the results of the merger wave and research the relationship between China’s firms merged and audit quality in today.The thesis select RSM merger event as the object of study, researching the impact of accounting firm mergers on audit quality by case study. The merger of RSM Nelson Wheeler is Strong alliance for administrative motivation, in line with the characteristics of the combined tide. Meanwhile, after the merger RSM Nelson Wheeler firm, it has been became the first local firm for three consecutive years. And became the first local firm whose annual income over one billion. So, the RSM Nelson Wheeler merger case was consider be a good representative for this merger wave.Be selected by the commonly used alternative audit quality indicators, this thesis choose the proportion of non-standard audit opinion as main measure, using the extent of earnings management as supplementary methods of measurement to research the relationship between audit quality and RSM Nelson Wheeler firm combined. The empirical results show that the accounting firm of RSM has been expanded in this merger, but the quality of auditing was not along with a significant enhancement. Due to inadequate preparation, and the lack of integration experience, the firm’s audit quality was decreased in the combined initial. However, with the depth of integration, the RSM firm’s audit quality has improved quickly. The empirical results in part be explained by the accounting firm merger does not mean necessarily to enhance audit quality. Simple form of merger would not improve the audit quality of the accounting firm. Only pay attention to the preparatory work, integrated work and consolidated work, can be truly achieve the aim of "bigger and stronger." Meanwhile, the Government should give the targeted guidance in the firm post-merger integration.The innovation of this paper is to build a measurement systeme for case studies. Meanwhile, this paper according to th empirical results of the RSM’s combined case propose some recommendations. Therefore, this article has some practical function and creativity.